Warsh's task forces give the Fed wiggle room to put off rate changes until December
Four internal task forces unveiled by new Fed chair Kevin Warsh give the central bank room to leave policy rates unchanged until December, economists said. The task forces will review the framework, communication, bank supervision and balance sheet, and report preliminary findings by autumn. The two-year US Treasury yield fell five basis points after Warsh's first scheduled press conference.
Federal Reserve Chair Kevin Warsh announced the creation of four internal task forces to review how the institution operates. The task forces will examine the policy framework, public communication, bank supervision and balance sheet management, and will deliver preliminary findings to the Open Market Committee by autumn. Warsh said the review aims to "increase the institution's transparency and produce a more rules-based decision process".
Economists read the announcement as signalling that the Fed could put off any rate change until December. JPMorgan economist Michael Feroli said: "The review process has bought additional waiting room; the market has now pulled the odds of a pre-December cut to under 30%." Goldman Sachs said it had moved its forecast for a first cut from September to December.
Warsh said the possible effects of the US-Iran framework deal on oil prices would be closely monitored. The two-year US Treasury yield fell five basis points to 3.84% after the speech, while the S&P 500 closed the day 0.3% higher.
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